No, I Can’t Sign an NDA

Ben Buie |
4/20/13

Recently, I signed up for CofounderLabs.com because I’m looking to join a startup. It has been about 4 weeks, and although I haven’t found a startup yet, I have had a lot of people reach out from all over the country.

It surprises me, although it shouldn’t, how many people ask me to sign an NDA before they’ll share their idea. It has been happening so much lately that it inspired me to think more deeply about this subject.

The misconception that ideas should be kept secret is usually (but not always) more prevalent with beginner entrepreneurs. I hear this misconception all the time from students. I think this is because the road ahead with their idea is paved with uncertainty. They love their idea, they may even think they are the first person to think of it (which is rarely true), and they have very little idea of how to make it a reality. They they don’t want someone more experienced to steal the idea or execute it better of faster.

This fear may actually be a red flag that the person is not the right one for the job. If they are not passionate enough about it, to the point where they will become the best in the world at it, then they may want to look for other opportunities.

The truth is, ideas are worthless. Someone once told me that if they were valuable, there would be a market for them. Think about it, when was the last time you were willing to pay for an idea only to invest in it years of your life and wads of your cash with the risk of having nothing in the end? You wouldn’t because the real value is in the execution (your life and cash), not the idea. McDonald’s didn’t invent the hamburger, Apple didn’t invent the MP3 player, and Facebook didn’t invent the social network, they all just executed the idea the best.

The question of whether you should share your idea comes down to whether you want your first startup to be a success or failure. Reality is that entrepreneurs are likely to fail. Here are some ways that sharing your idea my help you beat the odds:

Feedback from customers

Most ideas are illusions. Your first priority with a shiny new idea is to make sure it isn’t a mirage for which customers won’t pay (see Lean Startup). When you ask them for money, which is hopefully sooner than later, it may not be the best time to ask for an NDA as well.

Feedback from investors

Investors can be an awesome source of advice, especially if they are experts in your market or industry. Unfortunately, investors don’t sign NDAs. They hear thousands of ideas a year and NDAs would eventually paint them into a legal box that prevents them from doing their job.

Build a stronger team

Most likely if someone likes your idea enough, they’ll join you rather than steal the idea. The exception is if they don’t like you, so be a good person and you’ll probably avoid that problem.

Also, finding team members is hard enough without asking people to leave a legal paper trail that could open them up to future lawsuits.

Solutions are more likely to happen

You probably love your idea because it solves a problem in your life. If you don’t want to share because you’re unsure if you’ll be able to make the idea happen, it may be a good thing that someone else solves your problem.

Other reasons to share your idea:

A good product pitch takes practice and the more you get, the better your pitch will be. The longer you take to start sharing, the longer it will take you to perfect your pitch.

Very few ideas survive the path to create them. Flickr started as a multiplayer game and YouTube started as a dating site. The idea you’re trying to keep secret may shortly be discarded anyways.

You’re going to have to start sharing your idea eventually.

The only risk of sharing your idea is that someone might steal it. This is a possibility, but again, if you aren’t passionate enough about the idea to make it happen, then you shouldn’t do it anyways.

Some caveats that makes sense are below. Please comment on the post if I missed something.

Processes or Research

After writing this post, one of my physics friends shared that they require an NDA to protect their internal processes or research. This makes sense being that his company is predominantly grant funded, is well into the revenue generating stage, and is highly specialized. So, if your company is already creating value (i.e. revenue) based on executing an idea that someone may steal, then an NDA may be appropriate.

Please share your thoughts or additional pros or cons of ideas in the comments below.

About the Author

His passion for entrepreneurship led him to study business and learn to code. Although he never anticipated working on the web, Ben has spent the past 9 years learning everything he could about building and operating websites and web assets.

When not at work, Ben spends a lot of his time with family. He is married to a “beautiful” woman and they are raising 4 energetic boys. In his spare time he loves keeping up with technology, playing guitar, eating Sweet Cow ice cream, and painting (although he has very little time for painting these days). Other than that, Ben is a supporter of freedom and liberty, a fluent speaker of Russian, and he tries to be a humble follower of Jesus.

“they may even think they are the first person to think of it (which is rarely true, if not impossible)” … this is factually misleading. The mathematics of new ideas being permutations of old ideas if factorial. 13! = 6.2 Billion. Idea space is at least like 50! (have fun with that decimal expansion.) Your idea is not my idea: even when you _try_ to monkey me.

http://www.facebook.com/benbuie Ben Buie

I’m not sure I follow you, but even if you did have an original thought it is not worth anything unless you can execute it.

In addition, very few ideas survive the path to create them. Two perfect examples of this are Flickr, which started as a multiplayer game and YouTube, which started as a video dating site.

Chuck Short

Business people are mostly incapable of following a creative person’s idea. So they are required evaluate the person with the idea; and the value of the trademarks associated with that person, and invest in people not ideas. So if a ‘harvard’ or former ‘hotco’ guy asks someone to sign an NDA people will do it. If a state school schmuck with no track record asks you to sign an NDA you don’t. The notion that there are “no new ideas” has been around for a long time; King Solomon is on record for this; as well as prominent scientist, philosophers, etc., over the millenia since. In the progression of man; each idea will mostly be an evolution of the contempary fashion. But the fact is: there are so many potential ideas that counting them is computationally impossible with the amount of Gibbs free energy contained in our solar system. A mere human cannot even begin to contemplate a mere fraction of them. “Your thoughts are not my thoughts…” Isaiah 55:8 – that is from a Prophet, not a mere king.

Regarding worth: indeed an idea for an anti-gravity time travel machine is not worth much if you can’t reduce it to practice. But constructive reduction to practice is sufficient in the United States. For example; Kary Mullis was awarded a $10,000 bonus for his idea; which was later sold for $300M. And Zuckerberger eventually did have to pay the people who inspired him $65M and they did’nt have an NDA, or patent, or much of anything on record.

And a bit of education about what an NDA means; it can be a ticket to ask a judge for a preliminary injunction against you; and enhances any potential lawsuit according to its writ. Signing them is expensive particularly if you have deep pockets. If you are a broke dude trying to join a team; its not likely you will ever be sued unless you really do steal a very valuable idea and end up with deep pockets. So the no NDA advice is really geared for the potential victims of a malicious lawsuit, i.e. a person who is already successful. The newbie would be required to sign one to join a decent team.

You are right about people loving their ideas; they are like children. And children are mostly a liability until they finish graduate school and get a job. And only a few children are deserving of scholarships from anyone other than their parents.

http://www.facebook.com/benbuie Ben Buie

The fact that Zuckerberg had to pay for the idea is a good example of all that is wrong with the legal system and is a big part of why I won’t sign them.

The legal system is such that you don’t even have to steal an idea for someone to claim you did.

In addition, I’d argue that signing them is expensive if you either have or will have deep pockets. I don’t know many entrepreneurs that do what they do thinking they won’t have deep pockets in the future, not that it is about the money, just that the money is part of it.